Smart Technology Mitigates the Diligence Bottleneck
The following was published in the July 2015 issue of the Law Journal’s Legal Tech Newsletter and is written by Christopher S. Edwards, an attorney in the corporate practice group at Reitler Kailas & Rosenblatt LLC in Manhattan.
Due diligence is an integral and essential part of corporate transactions, yet for lawyers and their clients, it can be a painful process. In mergers and acquisitions and other dynamic and time-sensitive transactions, due diligence often becomes a bottleneck that slows down deals, a frustration to attorneys and their clients alike.
As a corporate attorney at Reitler Kailas & Rosenblatt LLC, a mid-sized firm in New York City, diligence is a vital part of my work in mergers and acquisitions and venture capital transactions. Working solo or with colleagues, I typically conduct due diligence by reading through thousands of pages of a target company’s dense and complex contracts, looking for problematic provisions and summarizing key concepts. Depending on client needs, the work product I often generate for each contract I review is a summary template which essentially consists of a table in Word specifying which provisions/information I am looking for and a corresponding summary of each of those respective provisions in the given document. Sometimes these summary templates are passed along to a client attached to a diligence memo. Other times they are used internally to generate the diligence memo. Clients, with their focus on costs, are always receptive to ideas we have for ways to work through the diligence process more efficiently, and as their counsel, I want to help keep costs to a minimum.
In addition, accuracy remains of paramount importance – after all, diligence is essential to evaluating the risks and benefits of a transaction. I am eager to use time most efficiently, doing what I do best – analyzing the results of the review in order to negotiate and execute deals on behalf of my firm’s clients.
In researching solutions to expedite and improve the diligence process, I came across eBrevia, a software company founded by Harvard Law School graduates and a computer scientist that applies an artificial intelligence technique called “machine learning” to contract review and abstraction. eBrevia’s software extracts relevant information for attorneys using a natural language processing methodology developed at Columbia University. I was intrigued by the company’s unique application of this cutting-edge technology to the law, as I think that adopting technology to improve how we serve our clients is key to the future of law practice.
Elegant Interface Powered by Sophisticated Technology
eBrevia’s diligence review tool, called the Diligence Accelerator, is impressive. The user interface is elegant and logical; with only a brief demo and overview from the company, I used the software intuitively and with confident ease. eBrevia allows attorneys to select key provisions for extraction from an extensive list of concepts typically relevant in due diligence for mergers and acquisitions. The remarkable and game-changing aspect of eBrevia’s technology is that it searches for concepts rather than just keywords, and then extracts the relevant concept no matter where it is located in the document and regardless of the vocabulary used to express it. For example, an important provision in M&A such as Change of Control can be expressed using language like “change of control”, “assignment by operation of law”, or “merger”. Of course in a merger agreement, the word “merger” could be used a hundred times with just one of them applicable to the Change of Control concept. This is where eBrevia’s artificial intelligence provides substantial advantages over a simple keyword search. Essentially, knowing what to extract for a given concept and what to leave behind.
After the attorney edits the extracted provisions and selects additional provisions from the source document as needed by a simple right click, eBrevia’s software generates a summary template. This summary template looks very much like the diligence summaries we typically prepare for internal use or produce to clients. eBrevia works quickly – the software can analyze a batch of fifty documents in less than a minute.
Cloud hosting allows the company to easily scale when large volumes of documents are being processed. As a user, this means I never have to wait long to see my results. In addition, because the software is constantly getting smarter, I’m always able to take advantage of the latest version when I log in. Importantly, eBrevia is hosted on top-tier cloud providers that pass regular security audits and employ military-level access controls. Documents are protected with the same highly secure protocols as found in leading virtual data rooms including 256 bit end-to-end SSL encryption in transit.
eBrevia in Action
After seeing a demo of eBrevia’s software, I decided to put the Diligence Accelerator to the test on an actual deal. My fellow attorneys at Reitler were receptive because of our streamlined approach and the fact that our clients, many of them sophisticated technology companies themselves, are always enthusiastic when we proactively adopt technological solutions to offer more efficient legal services.
On this deal, we needed to analyze a new client’s entire corporate structure and business history on a very tight deadline for a highly complex merger.
So on a Saturday morning at the office, I accessed eBrevia easily by logging in through the company’s website. The majority of documents I uploaded to eBrevia’s system using a simple drag and drop feature were scans. The system’s optical character recognition software automatically converted the scanned documents to text so they could be analyzed. As I later saw, even though a number of the scans were of poor quality, the system’s artificial intelligence technology was still able to extract applicable concepts despite the fact that not all characters converted correctly. Many of these concepts would have been missed by a keyword search (for example, where the word “assignment” on a poor quality scan gets converted as “ossignment”).
I selected provisions to analyze from a long list of provisions relevant in mergers and acquisitions, such as change of control provisions and terms of key customer contracts, and selected batches of documents to analyze at once. Within seconds, the Diligence Accelerator had extracted the concepts I was looking for into summary templates for me to review. The system also provided me with a chart overview that quickly showed me which documents contained which of the provisions I had selected.
Taking each document in turn, I reviewed the summary templates, clicking on an icon next to each piece of extracted text to see the relevant language highlighted in the source document. This helped provide me with context for the information I was summarizing. Generally speaking, the Diligence Accelerator abstracted exactly the text I would have chosen to copy and paste for a diligence summary. I was able to perform free text editing within the interface after clicking on another icon. This allowed me to add my own notes and summarize the extracted text still further. The process fit naturally into my due diligence workflow and provided me with options to easily remove text from the summary template as well as add additional text from the source document. For example, for some provisions, I found that the Diligence Accelerator had been more comprehensive than I deemed necessary, so I simply deleted text using a trash icon. Using eBrevia’s split screen, I quickly read through the source document looking for any deal-specific terms. Being an overly cautious lawyer, I also double-checked the reports that the program produced against the original diligence documents, and it accurately captured the relevant provisions of the documents.
Once satisfied with my review of a given document, I changed the its status to “Review Complete”. My team and I repeated this process for all of the documents in the deal. Intermittently, we would export our work to Microsoft Word. The result was a clear and cleanly formatted table containing the provisions exactly as excerpted and edited.
Using eBrevia’s software, I was able to save about two-thirds of the time in my review. This allowed me to devote more time to the higher-level analysis and negotiation of the deal. The deal was moving quickly and we were under a tight deadline so using the software also helped to save a weekend that I would have otherwise had to allocate to the review.
eBrevia Brings Tangible Benefits to the Practice of Law
Incorporating eBrevia into my law practice offers three principal benefits:
Increased speed and efficiency — Expedited document review brings much-needed efficiency to my practice. It allows me to get deals done more quickly. In addition, clients welcome the lower bill for due diligence, but remain happy to pay fees for where I add the most value, namely the higher-level work of drafting and deal negotiation.
Increased accuracy — I offer my firm’s clients paramount accuracy even when I conduct diligence manually. However, eBrevia allows me to offer the same rigorous accuracy level much more quickly, because I start with a culled set of provisions, enhance or edit the abstracted text, and review the source document for what the software may not have pulled.
Marketing Appeal — My firm’s clients, many of whom are eager and early adopters of technology themselves, have been extremely receptive to my using automation software and proactively seeking technological solutions to practice more efficiently.
With its Diligence Accelerator and additional solutions specifically designed for other practice areas, eBrevia’s technology has great potential to have a transformative effect on corporate law. I am pleased to be an early adopter and proponent, keeping legal practice and my firm’s clients at the forefront of technology that will streamline and improve legal services.
Christopher S. Edwards is an attorney in the corporate practice group at Reitler Kailas & Rosenblatt LLC in Manhattan. He provides counsel to a variety of companies, from start-ups to publicly traded entities, in the fields of venture capital, mergers and acquisitions, banking, securities and general corporate law. He graduated from Harvard Law School in 1998 and previously worked in several large law firms and as in-house counsel at a large financial institution.